Volvo Penta

Good profitability despite weak demand

Volvo Penta contributes significant synergies and economies of scale to the Volvo Group’s total diesel engine manufacturing. Approximately 10% of the total volumes in the Group’s diesel-engine plants in Europe and more than half of the Group’s global volumes of 16-liter engines are delivered to Volvo Penta’s customers.

The Industrial business segment is the part of Volvo Penta’s operation that generates the largest volumes based on the Volvo Group’s diesel platforms. Volvo Penta’s product range in the Industrial segment comprises high-technological diesel engines for industrial applications, for example, power generation, cranes, mining vehicles and container handling equipment. With unique performance, operating and environmental features, Volvo Penta’s industrial engines create strengthened competitiveness for such world-leading customers as Sandvik, Cargotec and SDMO. By utilizing the strength of the Volvo Group’s combined service offering, Volvo Penta is also able to offer efficient support in the form of global service and aftermarket services.

Within the Marine Commercial business segment, Volvo Penta delivers diesel engines for use under the toughest possible offshore conditions. Coast guards and sea-rescue organizations, ferry companies, port authorities and shipyards worldwide install Volvo Penta’s reliable engines in boats for sea rescue, patrol, passenger transport, security and maintaining offshore wind turbines.

Within the Marine Leisure business segment, Volvo Penta delivers diesel engines, gasoline engines and complete drive systems for most of the leading boat brands in the industry, for example, Fairline, Sunseeker and Princess of the UK, Jeanneau/Beneteau of France, Bavaria of Germany and Intermarine of Brazil.

Using innovative, technical solutions for boats, Volvo Penta creates significant advantages for customers in the form of lower fuel consumption, simpler maneuvering and reduced installation time. With joystick maneuvering, sophisticated communication and navigation equipment and fully integrated drive system, Volvo Penta is quickly moving toward delivering complete boat-driver environments, with a strong focus on comfort and user-friendliness.

Volvo Penta’s marine customers have access to one of the world’s strongest offering of aftermarket services and a global service and dealership organization with approximately 4,000 dealerships worldwide.

Total market
The total market for industrial engines primarily in Europe, but also North America, was weak during the year due to the continued decline in the global economy. The major manufacturers of equipment and industrial vehicles were forced to successively reduce production as a result of weaker demand. A slightly stronger trend in China and the rest of Asia during the first half of the year weakened toward the end of the year due to the global financial turmoil.

The total market for marine diesel engines was largely unchanged, compared with the weak trend in recent years. European boat sales were negatively impacted by austerity packages and financial restrictions in mainly Southern Europe. In Italy, traditionally Volvo Penta’s largest marine market, sales in many boat segments are currently about 70-80% lower than a few years ago.

In North America, sales of marine diesel engines and gasoline engines rose during the year as a result of the continued increased demand for leisure boats in the US, but volumes still remained low compared with the peak years.

Earnings trend
Total sales amounted to SEK 7,631 M, compared with SEK 8,458 M in 2011. Operating income amounted to SEK 541 M, compared with SEK 825M in the preceding year. The operating margin was 7.1% (9.8). Earnings were negatively impacted mainly by lower sales and an unfavorable product mix.

Saves fuel

New products
Using aggressive investments in product development, Volvo Penta has created a modern and highly competitive product program for industrial engines in recent years. With the SCR technology, well-proven by the Volvo Group, the industrial program meets the emission legislations for coming years, while Volvo Penta is able to offer high fuel efficiency and installation benefits.

During the year, Volvo Penta’s Tier4i-approved 13-liter engine received important North American mining certifications. These mining certificates take into account the amount of emissions from the engine and make calculations based on the ventilation rate. The lower the ventilation rate, the more cost-efficient mining operations can be conducted and here, Volvo Penta’s SCR technology has demonstrated major competitive advantages.

On the marine side, Volvo Penta launched the V8-380 for leisure boats during the year. This state-of-the-art gasoline engine at 380 horsepower has been awarded and attracted major attention within the marine industry, not least thanks to good environmental features and performance.